Foreign Markets: Investment or Expense?

Lately I’ve been thinking a lot about the paradoxes in how some companies approach going global and investing into such globalization. Usually every startup and even some established internet companies I talk to about why they don’t translate their applications to other languages quote the costs involved in translation as the main reason for why they stick to English speaking users only. But my question is why they keep ignoring the revenues that are waiting for them abroad after some small investment in translation?

Living in Russia I’ve been watching the Russian internet market for quite a while now and the most irritating trend here is how clones of various successful US projects turn into market leaders here while the original products ignore the market entirely and only enter it when it is already too late.

The most famous example is of course Vkontakte, the social network that is nothing but a Facebook clone: they simply copied everything down to the last design element and easily made it to the position of the market leader in social networking. Facebook kept ignoring the situation for years and only in summer of 2008 they finally noticed the Russian market and launched a localized version. But of course with two established market leaders sharing the social networking space it is now virtually impossible to gain any success in the market for Facebook now and users keep asking why this newly launched Facebook looks so much like their favorite Vkontakte. So it is no surprise that while Facebook is a hit in many European countries, Russia is one of a handful of places where the social networking giants is nowhere near the top 1 or 2 position - its 7^th position in the market must be pretty humiliating knowing that they lose to their very own clone.

The situation is pretty much like this everywhere. For example, last fall four startups were launched almost simultaneously in family building space here in Russia and two of them got to be pretty popular quickly engaging dozens of thousands of users while the market leader Ancestry as well as the recent favorite of the blogosphere Geni don’t even have Russian versions.

These examples are more than surprising to me given that the market in Russia is huge not only in terms of how many users you can quickly attract with a good application. Of course to any business money should be their main motivation and the money is here as well: the CPM rates are generally much higher than what we have come to expect with US-based advertising networks. What’s more, people are even learning to pay for the things they either need or enjoy - be it software or a productivity web application. So the market is here and it is huge yet people keep ignoring it quoting the costs of translation (generally $500-700 in my experience) and totally forgetting about what this small investment could turn into eventually.

Today’s rather interesting news is about Salesforce as they have proudly reported that after localizing their CRM software their revenue from Russian customers doubled here. By December 2007 Salesforce already had a few subscribers in Russia so they decided to find a local partner to properly address the local market. That local partner helped them with localization and sales in the market and the results are here already and Salesforce are more than happy about such results.

I myself have been using Zoho CRM service pretty heavily recently and have enjoyed it a lot as this is probably the most comprehensive service I’ve seen that is also very easy to understand after half an hour or so of use. Again I could not help but ask myself the same question: why such an excellent service is not localized for the market that is only learning such products exist with local players offering very basic services and costing a fortune at the same time?

I will not be talking about other markets that also stay under-served because international companies are not willing to deal with the hassle involved in translation of their applications or finding a local partner to help them with the market simply because I am no expert in other markets but I have heard enough grumbling from disappointed international users about their inability to use/watch/pay when it comes to something they very much enjoy so I think the situation must be pretty much like this everywhere.

Yet international businesses keep focusing on English-speaking markets and forgetting about the rest of the world - the people that have another language as their native. But these people exist and they are equally willing to pay for something they like - be it with their eyeballs or with their own money. Yet internet companies still talk about how expensive it is to enter some foreign markets and keep considering translation as some hardly wanted expenses - instead of considering it to be an investment that will open new revenue streams they never knew existed at all. And while they stay scared away by these “expenses”, someone else is cloning their products elsewhere and is grabbing the revenues that could be theirs - by investing a little into development. I somehow feel that making this initial investment could be a much better idea than spending days in local courts later trying to prove your clones don’t have the right to exist at all - simply because you yourself provoked their existence.